Trolls filed 40% of patent infringement lawsuits in 2011

"Non-practicing entities" filed just 22% of infringement lawsuits in 2007.

Trolls have long been the standard villain in patent debates. Often little more than an empty office in East Texas, patent trolls produce no useful products themselves but earn millions of dollars by threatening patent lawsuits against productive companies. There is plenty of anecdotal evidence that patent trolls are a serious and growing problem, but until recently there has been little hard data to back up the evidence.

A new study helps to fill the gap by providing systematic data on the growth of patent troll litigation. Robin Feldman, a professor at UC Hastings College of Law, teamed up with Lex Machina, a Stanford Law spinoff that collects data on patent litigation, to compile a systematic survey of patent litigation. Their results are striking: the fraction of lawsuits filed by troll-like entities grew from 22 percent in 2007 to 40 percent in 2011.

The study was inspired by the America Invents Act, last year's largely toothless overhaul of the patent system. In it, Congress asked the Government Accountability Office (GAO) to study the impact of non-practicing entities—a more clinical term for patent trolls—on the economy. Because Lex Machina already had a database of patent litigation, the GAO asked it to produce a random sample of 100 patent lawsuits for each year from 2007 to 2011. In addition to supplying the GAO with the data it needed for its forthcoming study, Lex Machina decided to publish its own interpretations of the sample.

The legal profession has come up with a number of alternative terms for patent trolls—there's also "patent assertion entities." In an apparent bid to make things even more complicated, the authors coined another term, "patent monetization entity," to describe roughly the same concept. Then they went through their sample of 500 patent cases and classified each of them in one of several categories, including operating companies (ordinary tech firms), monetizers (patent trolls), and universities. They found that the monetizers' share of patent litigation has almost doubled in the last five years:

Enlarge/ Note: The graph that actually appears in the study is incorrect. The above graph was a correction provided to Ars Technica by the authors.

Lex Machina

The above graph may understate the effect of patent trolls on the economy for two reasons. First, it shows troll lawsuits as a share of all litigation, but the overall volume of litigation has also been increasing. Second, anecdotal evidence suggests only a small fraction of troll threats ever lead to lawsuits. In most cases, targets settle without going to trial. "From all appearances, lawsuits filed are only the tip of the iceberg, and a major operating company may face hundreds of invitations to license for every lawsuit," the authors write.

The America Invents Act was enacted in the final months of the study period. And there was at least one minor change designed to deter troll behavior: the law made it harder to name many defendants in a single lawsuit. But the law's main provisions, such as the switch from a "first to invent" rule to "first to file" is unlikely to affect the volume of troll litigation. In any event, the authors say their sample is too small to tell whether the AIA had any significant effect on patent litigation. We'll have to wait for future research for a definite answer on that question.

Isn't there something of a definitional difficulty here? For instance, I presume Kodak while it is (was?) making stuff is not a "patent troll". Would it become one when it is finally reduced to a "patent owning rump"?

The problem is its more expensive to litigate than it is to just pay the extortion money. I don't know how you would fix that problem but you need to make it unprofitable for patent trolls. The trolls don't care about winning the case they basically work on the theory it is too expensive to go to court.

Maybe allow defendants to work through a single case as a complete party instead of individuals so they can pool resources.

I don't know how you would fix that problem but you need to make it unprofitable for patent trolls.

Exactly. Make it easy to fight at least the trolls and they'll go back under their bridges if they can't simply steal everyone's money. I assume some will still try anyway but that alone should make the amazing fast paced patent-troll career world a lot smaller and less secure then it already is.

This is truly troubling, especially that 6/10 of the top litigants are Patent Monetization Entities.

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One possible reason for the increase in filings in 2011 (though refuted to a large extent by the authors):Some anecdotal evidence also suggests that monetization entities may have rushed to file infringement cases before the America Invents Act was signed into law. This could have had the effect of temporarily increasing the number of monetization lawsuits in the months leading up to passage of the Act and decreasing the number of monetization lawsuits afterwards.

I also found it interesting that when the monetizers proceed to summary judgment, and to trial, that they lose. Thus, it would seem that their patents are of highly dubious quality, as many have alleged. The monetizers also proceed to settlement more frequently than individuals or trusts, which is the expected behavior of a patent troll. However, the authors note that the sample size is too small to make definitive conclusions.

"Non-practicing entities" filed just 22% of infringement lawsuits in 2007."

It is comical for me to see the big company "victims" and their paid shill pundits complain about the supposed “explosion” in patent litigation by NPEs. They attribute the increase in litigation somehow to “unreasonable” or opportunistic behavior by patent holders.

This is of course complete nonsense. Patent holders started initiating more patent litigation in response to the 2007 CAFC decision in the Sandisk/STM case and similar cases, where the Court said that you could not even MENTION a patent to a potential licensee without exposing yourself to a declaratory judgement lawsuit. That is why there is so little "litigation" before that time.

Very abruptly the entire prior model of dealing with patent issues (i.e. reasonable business discussions taking place over several months in face to face meetings) morphed into a one-dimensional “first strike” model. There is no point in sending someone a letter asking to discuss the issue rationally and without the cost and hassle of lawyers.

What is ironic is that this result was brought on by the big companies, their big law firms, etc., who wanted a means of controlling the dialogue and process for patent resolution. Big firms need big billable hours, so the Sandisk case was a boon/bonanze for them as well because now they could counsel their fat clients to sue at the drop of a hat. Given this kind of incentive, guess what happened: MORE LITIGATION

Given that the patent owner now knows that if wants to get a license he must now sue, or worse, maybe get sued somewhere in the boondocks, what is the natural result of this opinion? MORE LITIGATION

Again the result is that b/c everything is now in the litigation domain, rational thought has gone out the window, b/c now one must deal with litigation lawyers, accelerated court schedules, etc., all of which have never lent themselves to productive dialogue.

So I submit if you were to query any REAL patent holder, as opposed to the theoretical boogie man IP holder that the academics posit, you will find a real person who makes a rational decision based on the game rules as instituted mostly by the game riggers and their big $$ paid shills, not by the little guys trying to gain a small return.

Non-practicing entity, patent monetization entity, patent assertion entity, patent troll... None of it describes what it really is: racketeering. Extorting money from people by threatening to destroy their business.

Don't forget the copyright lawyers who have pretty much adopted the very same model - just using (as expected from such lawyers) more dubious means and even more dubious 'proof'. Is it any wonder they started using this type of business model?

"Only complete functional physical objects or substances should be patentable."

A computing device (including a smartphone) that has been specifically adapted through programming to perform certain functions is still a physical object. All computing devices, by their nature, have some form of programming, whether it is hardwired or "soft" coded.

So this attempt to ban "software" patents is doomed to failure, b/c they are part/parcel of every computing device.

A computing device (including a smartphone) that has been specifically adapted through programming to perform certain functions is still a physical object.

Which, ultimately, is irrelevant to the vast majority of method patents. They wouldn't exist without computers, and the vast majority are vague, unhelpful with regards to implementing them, and written by lawyers for lawyers (not engineers) specifically to fight over in court.

No knowledge of any value is preserved, they're just gaming the system to leech off actual, productive entities.

Quote:

So this attempt to ban "software" patents is doomed to failure, b/c they are part/parcel of every computing device.

Software patents can be banned by simply eliminating "method" patents, which would clear out entire areas that have no business being covered with patent protection.

I recently heard that Silverstone, maker of aluminum PC cases, has a patent on 90° rotated mainboards, i.e. those where the ports come out the top and not the back. This shit is really beyond me. What kind of a world are we leaving to our kids? In ten years you won't be able to start a business anymore, because everything worth doing will have been patented from all angles twice.

I also found it interesting that when the monetizers proceed to summary judgment, and to trial, that they lose. Thus, it would seem that their patents are of highly dubious quality, as many have alleged. The monetizers also proceed to settlement more frequently than individuals or trusts, which is the expected behavior of a patent troll. However, the authors note that the sample size is too small to make definitive conclusions.

Or alternatively, the more likely the patent will survive in court, the more likely companies will settle. We need to beat up on the patent trolls with facts to have any chance at reform, and even then it's a long shot.

Abolish patents for algorithms or methods. Only complete functional physical objects or substances should be patentable.

There's some algorithms that I think deserve consideration for patents. Cryptographic algorithms are a main example. That being said, I'm not sure how to describe what is or isn't worth a patent (crypto algorithms are analogous to patentable real-world devices, locks and ciphering machines, but that's probably not specific enough) and I'd be okay with throwing out the small fraction of legitimate software patents if it also got rid of the many idiotic ones out there.I even read somewhere an argument in favor of abolishing all patents. If you invent something you still get to be the first to bring it to market, the first-mover advantage in business is pretty significant, and right now patents are serving to impede innovation more than they encourage it.

Company's such as the big multi-national that I work for contribute to this patent gun-slinging. Those of us among the technical staff are required to file at least a minimum of disclosures each quarter (the number varies by division and the career aspirations of the managers/directors/VPs involved). As a so-called "subject matter expert" who is called upon to review patent disclosures involving specific types of technologies & uses, I see a lot of desperate junk come through the system - a lot of chaff. And while we do patent scrubs on products before they ship, which means that we look for ways in which we can control certain ideas embodied in these products, a lot of the stuff that makes it through the system has not been reduced to practice: these are simply ideas / theories. Should people/companies be able to patent ideas that they haven't developed?

When we sell of pieces of the company, we go through a process of dividing up the patent portfolio, which is often a kind of guesswork that is greeted with the enthusiasm of one who is taking out the trash. Some blocks of patents are simply put up for sale (one such block, I recall, contained more than 25 patents on fuel cell technologies). Where does this stuff go? Perhaps to the trolls.

Questions I'd like to see thoughtfully discussed:1] What should be the objectives of a system for establishing "intellectual property" rights?2] What methods might work best in achieving these objectives? (and can there be some process for testing & improving the methods without causing a mess?)3] What methods might be used to reduce the complexity and cost of determining intellectual property rights?

I heard this crazy rumor once. Somebody was trying to say that the purpose of the patent system was to give inventors temporary protection of their ideas in order to encourage innovation. Can you believe that nonsense? Clearly patents exist for the sole purpose of providing an income stream to people who have no interest in new ideas.

Each industry that uses patents needs to have their own professional association that governs them and controls the awarding, and arbitration of patents, although in cases, perhaps it could still enter the regular court system, this is of course to be discouraged.

The entire process needs to occur on a site such as stackoverflow, which would also contain relevant has court data...

I heard this crazy rumor once. Somebody was trying to say that the purpose of the patent system was to give inventors temporary protection of their ideas in order to encourage innovation. Can you believe that nonsense? Clearly patents exist for the sole purpose of providing an income stream to people who have no interest in new ideas.

Without this sort of protection, inventors will just be undercut by fast-follower companies in the industry, and eventually the only inventions would be the uninspiring ones designed by committees. The problem is not that we hand out temporary monopolies (same with trademark and copyright, by the way), the problem is the ease of getting a patent and its value in court.

1. The appellate court in charge of patent cases is ludicrously pro-patent, so the things are huge sledgehammers in pre-trial negotiations.

2. Separately, the patent office is one of those few agencies which is self-funded by the fees it charges (and Congress actually transfers a bunch of their revenue to other government entities). So the patent office has every incentive to grant as many patents as possible.

3. Add to this the prohibitive cost for an examiner to do a "real" vetting of the application, you get a near-rubber-stamp patent office. The theory is that the overlapping or obvious patents will be knocked out by the courts, discouraging people from filing frivolous patents in the first place. But see 1.

The problem is its more expensive to litigate than it is to just pay the extortion money. I don't know how you would fix that problem but you need to make it unprofitable for patent trolls. The trolls don't care about winning the case they basically work on the theory it is too expensive to go to court.

Maybe allow defendants to work through a single case as a complete party instead of individuals so they can pool resources.

Make software patents enter the public domain when they are sold. If you didn't invent it and you don't still own it, you cannot sue over its use.

I heard this crazy rumor once. Somebody was trying to say that the purpose of the patent system was to give inventors temporary protection of their ideas in order to encourage innovation. Can you believe that nonsense? Clearly patents exist for the sole purpose of providing an income stream to people who have no interest in new ideas.

Without this sort of protection, inventors will just be undercut by fast-follower companies in the industry, and eventually the only inventions would be the uninspiring ones designed by committees. The problem is not that we hand out temporary monopolies (same with trademark and copyright, by the way), the problem is the ease of getting a patent and its value in court.

1. The appellate court in charge of patent cases is ludicrously pro-patent, so the things are huge sledgehammers in pre-trial negotiations.

2. Separately, the patent office is one of those few agencies which is self-funded by the fees it charges (and Congress actually transfers a bunch of their revenue to other government entities). So the patent office has every incentive to grant as many patents as possible.

3. Add to this the prohibitive cost for an examiner to do a "real" vetting of the application, you get a near-rubber-stamp patent office. The theory is that the overlapping or obvious patents will be knocked out by the courts, discouraging people from filing frivolous patents in the first place. But see 1.

It seems that the SDC (sarcasm detection chip) in you computer is burned out. If it's still under warranty you can get it fixed for free.

I heard this crazy rumor once. Somebody was trying to say that the purpose of the patent system was to give inventors temporary protection of their ideas in order to encourage innovation. Can you believe that nonsense? Clearly patents exist for the sole purpose of providing an income stream to people who have no interest in new ideas.

Without this sort of protection, inventors will just be undercut by fast-follower companies in the industry, and eventually the only inventions would be the uninspiring ones designed by committees. The problem is not that we hand out temporary monopolies (same with trademark and copyright, by the way), the problem is the ease of getting a patent and its value in court.

1. The appellate court in charge of patent cases is ludicrously pro-patent, so the things are huge sledgehammers in pre-trial negotiations.

2. Separately, the patent office is one of those few agencies which is self-funded by the fees it charges (and Congress actually transfers a bunch of their revenue to other government entities). So the patent office has every incentive to grant as many patents as possible.

3. Add to this the prohibitive cost for an examiner to do a "real" vetting of the application, you get a near-rubber-stamp patent office. The theory is that the overlapping or obvious patents will be knocked out by the courts, discouraging people from filing frivolous patents in the first place. But see 1.

It seems that the SDC (sarcasm detection chip) in you computer is burned out. If it's still under warranty you can get it fixed for free.

Hmmm... I think I isolated the fault to the PEBKAC unit at my desk. The points are still valid though :-)

Abolish patents for algorithms or methods. Only complete functional physical objects or substances should be patentable.

Honest question: wouldn't something like this destroy a company like Google whose primary value lies in their search algorithm? I understand that they generate revenue elsewhere but search is their bread and butter.

Abolish patents for algorithms or methods. Only complete functional physical objects or substances should be patentable.

Honest question: wouldn't something like this destroy a company like Google whose primary value lies in their search algorithm? I understand that they generate revenue elsewhere but search is their bread and butter.

I see no evidence that Google's lead in search is based on its patent portfolio. Microsoft and Yahoo both have plenty of patents, yet they have a much smaller market share.

Abolish patents for algorithms or methods. Only complete functional physical objects or substances should be patentable.

Honest question: wouldn't something like this destroy a company like Google whose primary value lies in their search algorithm? I understand that they generate revenue elsewhere but search is their bread and butter.

I see no evidence that Google's lead in search is based on its patent portfolio. Microsoft and Yahoo both have plenty of patents, yet they have a much smaller market share.

You only need one really good patent to win a large marketshare in search. Google have PageRank, which is also bolstered by lots of little secret ranking criteria and optimisations.

In any industry with a low barrier to entry, patents can protect a company from a newcomer copying their business and taking it away from them.

Abolish patents for algorithms or methods. Only complete functional physical objects or substances should be patentable.

Honest question: wouldn't something like this destroy a company like Google whose primary value lies in their search algorithm? I understand that they generate revenue elsewhere but search is their bread and butter.

I see no evidence that Google's lead in search is based on its patent portfolio. Microsoft and Yahoo both have plenty of patents, yet they have a much smaller market share.

You only need one really good patent to win a large marketshare in search. Google have PageRank, which is also bolstered by lots of little secret ranking criteria and optimisations.

(Bold added).

The secret sauce would remain secret; there's no reason for it not to.

One of the justifications for patents is to encourage trade secrets like this to be published so others could build on them. This goal is actively hindered by the current patent system. No one in the software industry learns anything¹ from reading patents - indeed, they're encouraged not to read patents at all, because that way lies higher damages.

I'm a practicing patent lawyer. Most critics of the US patent system find it easy to blame the "trolls" in East Texas. But what most people don't realize is many trolls are actually operating companies in disguise. Take Round Rock Research for example. It's no secret that Round Rock purchased a large portion of Micron's patents and now enforces them against Micron's competitors and others. Micron most likely has an ongoing financial interest in the outcome of the suits filed by RR. This is one example that is fairly easy to find via a google search. But most companies take significant steps to hide their trolling activities to hide their identity to avoid counter suits, bad PR, etc etc. This is not to say that all trolls are companies, but large operating companies are not the victims they claim to be.

The apparent underlying premise of the study, that patent trolls are the root cause of problems in the patent system, is, quite frankly, dumb. You can't decide that patents are property then refuse to allow (or limit) reassignment of those rights and expect an efficient outcome. That's even more hilariously stupid than trying to ban "speculators" from participating in financial markets. The root problems with the patent system are the overly broad reach of patents and the outsized damage awards. Banning reassignment to parties who aren't so-called innovators won't fix these problems and will simply make incumbents in an industry stronger at the expense of potential entrants (who are likely to have real innovations to offer). Fixing the root causes will take care of the patent trolls.

I'm a practicing patent lawyer. Most critics of the US patent system find it easy to blame the "trolls" in East Texas. But what most people don't realize is many trolls are actually operating companies in disguise.

Yes, corporations play by whatever rules exist (including Nomic rules aka lobbyists). When the rules lead to perversions like patent trolling, whether first party or by sock puppet, they should be changed.

I am a practicing patent lawyer, too. Why, exactly, do massive companies need protection from scary inventors, start-ups, non-practicing entities, and patent licensing companies represented by intimidating patent lawyers like me? Are you kidding? Take off your blinders. Massive companies don't need any protection from patent litigation - they actually force litigation on inventors, start-ups, non-practicing entities and patent licensing companies, because the huge companies copy all technologies and play the odds in patent litigation. Quite literally, they refuse to negotiate and take licenses from small tech companies unless forced into litigation. This dastardly problem is just that simple! And, before I go back to suing nasty patent infringers, please stop using the word "troll" when you refer to my clients. "Patent licensing companies" are the buyers of last resort for valuable technologies, and help broke inventors, bankrupt start-ups, and spent tech investors generate a worst-case return on their investments. Do you actually expect inventors and start-ups to square off with entrenched monster companies like Apple, Google and Cisco and win? Patents are all they have to protect themselves, so why exactly do the massive companies need protection again? And one more thing. In reality, the patent litigation playing field is tilted heavily in favor of the large companies - no kidding here - the companies have unlimited funds and if so much as a comma is out of place in the inventor's patent, he will face defenses that the patent is "overbroad, indefinite, vague, unenforceable, and obvious". Inventors and start-ups really don't have a fair chance to enforce their patents when facing the unlimited resources of large companies, so stop apologizing for the patent infringers.

Timothy B. Lee / Timothy covers tech policy for Ars, with a particular focus on patent and copyright law, privacy, free speech, and open government. His writing has appeared in Slate, Reason, Wired, and the New York Times.